Regional Australia Minister Simon Crean believes there is a future in dairy farming, but concedes the industry is being "screwed by the supermarkets".
The Australian Competition and Consumer Commission (ACCC) that Coles and Woolworths have bullied food suppliers.
As part of the so-called supermarket price war, the retail price of milk was slashed to just $1 per litre more than two years ago, prompting widespread concerns about the sustainability of the dairy industry.
, and forced many people out of the industry.
Anecdotally, some farmers reckon they have lost tens of thousands of dollars because of the cut-throat discounting.
Speaking at the National Rural Women's Conference in Canberra this morning, Mr Crean launched a broadside at the behaviour of supermarkets, but sought to reassure the audience that new technology will provide new opportunities for the industry.
"We've got to demonstrate that there is a future in farming," he told the conference.
"I believe that there is a strong future in farming and we have to work with the communities to secure it.
"The other thing which I think is important is the way they're being screwed by the supermarkets, and I'm delighted that the ACCC is looking at these questions of the uncompetitive practices."
In 2011, a Senate committee report into the effect of discounted milk prices found consumers were the winners, and dairy farmers were largely unaffected.
However, a group of dissenting senators, including the Greens, Coalition and crossbenchers, attached additional comments to the committee report, arguing the industry would be damaged by the move.
They warned supermarket discounting was creating a looming market failure in the fresh milk market, and it would damage the sustainability of dairy farming, milk vendors and processors, and eventually the supply of fresh milk to consumers.